Learn How To Pivot -- Or You're Toast

Chris Dixon

Jun. 14, 2010, 9:18 PM

My Hunch cofounders and I frequently ask ourselves: "If we were to start over today, would we build our product the same way we had so far?" This exercise is meant to counter a number of common cognitive biases, such as:

1. The sunk costs trap. People tend to overvalue past investments when making forward-looking investment decisions. From the rumors I've heard, Joost was a company that fell into the sunk costs trap. In the beginning, their p2p architecture was their main differentiator. Thus they invested a lot in building p2p infrastructure and required users to download a software client. When browser-based web video companies like Hulu and YouTube surpassed them, Joost switched to a browser-based client but still required a special plugin so they could maintain their p2p architecture. In fact, the problem the p2p architecture was solving - reducing bandwidth costs - had, in the meantime, become a secondary basis of competition. By the time Joost finally discarded the p2p model, it was too late.

2. The Bridge on the River Kwai syndrome. This is when entrepreneurs fall so in love with their engineering project qua engineering project that they lose site of the larger mission. Former engineers (like me) are particularly susceptible to this as we often get excited about technology for its own sake. Many products can be built much more quickly and cheaply by settling for good technology plus a bunch of hacks - human editing, partnerships, using 3rd party software - versus creating a perfect technology from scratch. At my last company, SiteAdvisor, we made the decision up front to build a non-perfect system that did 99% of what a much more expensive, "perfect" technological solution would have done. The software wasn't always pretty - to the annoyance of some of our engineers - but it worked.

3. Solving the wrong problem. Location-based social networks have been around for years. Foursquare came along just a year ago and has seemingly surpassed its predecessors. The other companies built elaborate infrastructures: e.g they partnered with wireless carriers so that users' locations could be tracked in the background without having to "check-in". Foursquare built a relatively simple app that added some entertaining features like badges and mayorships. It turned out that requiring users to manually check in was not only easier to build but also appealing as users got more control over their privacy. Foursquare's competitors were solving the wrong problem.

Ask yourself: if you started over today, would you build the same product? If not, consider signficant changes to what you are building. The popular word for this today is "pivoting" and I think it is apropos. You aren't throwing away what you've learned or the good things you've built. You are keeping your strong leg grounded and adjusting your weak leg to move in a new direction.